Total fair value swap
First Claim
1. A computer-implemented method for facilitating a Total Fair Value Swap transaction between a first counterparty and a second counterparty, the method implemented using a transaction management processor, a rate monitor, and a database, the method comprising:
- maintaining an electronic record in the database, the electronic record related to the Total Fair Value Swap transaction, the record reflecting the first counterparty'"'"'s obligation to make one or more fixed payments to the second counterparty and the second counterparty'"'"'s obligation to make floating payments to the first counterparty;
calculating an amount for each fixed payment using the transaction management processor, the calculation based on a reference interest rate determined by the rate monitor;
deriving, based on information retrieved by the rate monitor from a credit default swap market, a credit spread associated with the second counterparty at a specified time prior to each floating payment;
determining, based on each derived credit spread, an amount for each floating payment using the transaction management processor, such that the amount for each determined floating payment varies when the derived credit spread of the second counterparty varies; and
managing receipt of the one or more fixed payments and the floating payments using the transaction management processor, wherein managing comprises at least one of confirming, recording, and scheduling of the fixed and floating payments.
2 Assignments
0 Petitions
Accused Products
Abstract
A synthetic instrument known as a “Total Fair Value Swap” is disclosed. According to one embodiment, the Total Fair Value Swap may comprise an agreement between two counterparties, a “Fixed Rate Payer” and a “Floating Rate Payer”. According to the agreement, the Fixed Rate Payer makes a stream of payments to the Floating Rate Payer based on a fixed rate, and the Floating Rate Payer makes a second stream of payments to the Fixed Rate Payer based on a floating rate, wherein a first portion of the floating rate is based on a reference interest rate, and wherein a second portion of the floating rate is based on a credit spread associated with the Floating Rate Payer. The reference interest rate may be, for example, London Inter-Bank Offer Rate (LIBOR), prime interest rate, the US dollar swap rate, the U.S. Treasury Bond rate or any other widely traded interest rate that is reset periodically. The credit spread may be observed from the Credit Default Swap (CDS) market.
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Citations
8 Claims
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1. A computer-implemented method for facilitating a Total Fair Value Swap transaction between a first counterparty and a second counterparty, the method implemented using a transaction management processor, a rate monitor, and a database, the method comprising:
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maintaining an electronic record in the database, the electronic record related to the Total Fair Value Swap transaction, the record reflecting the first counterparty'"'"'s obligation to make one or more fixed payments to the second counterparty and the second counterparty'"'"'s obligation to make floating payments to the first counterparty; calculating an amount for each fixed payment using the transaction management processor, the calculation based on a reference interest rate determined by the rate monitor; deriving, based on information retrieved by the rate monitor from a credit default swap market, a credit spread associated with the second counterparty at a specified time prior to each floating payment; determining, based on each derived credit spread, an amount for each floating payment using the transaction management processor, such that the amount for each determined floating payment varies when the derived credit spread of the second counterparty varies; and managing receipt of the one or more fixed payments and the floating payments using the transaction management processor, wherein managing comprises at least one of confirming, recording, and scheduling of the fixed and floating payments. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8)
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Specification